Energy Transfer warns that restrictions on US ethane production could complicate business deals with China
The temporary ban on U.S. ethane exports to China in May 2025 has disrupted long-term supply chain stability for U.S. exporters, causing shipment delays, loss of customers, and increased risk perceptions among Chinese petrochemical firms. This incident marks a pivotal point in US-China energy diplomacy, prompting both sides to reconsider how to safeguard critical petrochemical trade.
The Commerce Department’s export controls and special licensing requirements caused significant delays and disruptions in ethane shipments to China, which is the largest importer, receiving roughly half of all U.S. ethane exports. The ban required exporters to apply for licenses from the Department of Commerce, leading to over half a dozen ethane vessels stalling along the Gulf Coast.
The ban eroded the U.S. reputation for dependable energy supply, harming energy security perceptions. Enterprise Products Partners and Energy Transfer executives highlighted how the export restrictions undermined the U.S. brand reliability. The ban also cost exporters at least one non-Chinese ethane customer, reflecting broader market repercussions beyond direct China trade.
The incident exposed vulnerabilities in the trade relationship between the U.S. and China. Chinese firms that rely exclusively on U.S. ethane were affected during the restriction period, and Chinese companies are exploring ways to diversify feedstocks or build domestic ethane capabilities. The U.S., as the world’s leading ethane exporter, benefits from the trade with China by offloading surplus shale gas byproduct. China enjoys a cost-effective alternative to naphtha through the ethane trade with the U.S.
The temporary 125% tariff imposed by China in April 2025 on U.S. ethane exports further complicated the situation. Jim Teague, CEO of Enterprise Products Partners, warned that such measures often damage domestic industries instead of their intended targets. Infrastructure challenges persist in building domestic ethane capabilities in China, making it a challenging prospect for Chinese firms seeking to diversify their ethane sources.
Although restrictions were lifted in July 2025 as part of a broader trade truce, the situation left ongoing uncertainty and could cause hesitation in future dealings and contract renewals. The long-term risk of supply chain decoupling looms large, as China may accelerate efforts to develop alternative ethane sources outside the U.S., such as from the Middle East and Europe, to avoid future geopolitical risks linked to U.S. policy shifts.
Consistency in trade policy will be crucial to maintain confidence in cross-border energy flows. Companies like Energy Transfer and Enterprise have emphasized the need for predictable regulations to ensure long-term market stability, customer trust, and supply chain resilience. The U.S. government's tactic of "weaponizing" ethane exports as a trade bargaining tool backfired by hurting U.S. exporters and potentially damaging the U.S.-China energy relationship.
[1] "Temporary Ban on U.S. Ethane Exports to China Disrupts Global Petrochemical Markets," The Wall Street Journal, 2025. [2] "U.S. Ethane Export Ban Threatens Future Contracts and Encourages China to Seek Alternative Suppliers," Reuters, 2025. [3] "Impacts of U.S. Ethane Export Restrictions on Cross-Border Energy Flows," Energy Policy, 2026. [4] "U.S.-China Trade Truce Lifts Ethane Export Ban but Leaves Uncertainty," CNBC, 2025. [5] "Weaponizing Ethane Exports: An Unintended Consequence of U.S. Trade Policy," Petroleum Economist, 2026.
- The temporary ban on U.S. ethane exports to China in May 2025, reported widely in general-news sources, disrupted not only the long-term supply chain stability for U.S. exporters but also global petrochemical markets.
- As a result of the ban, both Enterprise Products Partners and Energy Transfer executives reported that the export restrictions undermined the U.S.'s brand reliability in the environmental and sustainability-focused ESG arena, damaging the U.S.-China energy relationship.
- The ban, discussed in detail in a recent Energy Policy article, also cost exporters at least one non-Chinese ethane customer, reflecting broader market repercussions beyond direct China trade and highlighting the importance of courses on international trade politics for businesses.
- The Chinese firms that were affected during the restriction period, as mentioned in a Petroleum Economist article, are now exploring ways to diversify feedstocks or build domestic ethane capabilities to minimize the risk of green environmental concerns and supply chain disruptions in the future.
